As a brand new Forex trader, or at least someone who has decided he is going to trade Forex, I did not know where to start. There was so much reading material on the Web, and I found myself overwhelmed. So, I took a deep breath, and started Googling words like “Forex first steps” or “How to get started in Forex”.
The results were many, and I knew I had a lot of reading to do. I started sifting through the results, and recording what I was reading in the back of my head. While I encountered many different views as to the number one most important tip for Forex success, I started noticing a pattern among many of the leading sites.
The one thing that I found in common in almost all the articles I was reading was that almost all Forex experts claim that trading without emotion is crucial for ones Forex success. The consensus among experienced Forex traders is that one of the main reasons most new traders fail in Forex is because they let their emotions get the best of them.
Every article I read emphasized the importance of trading in the most objective way possible. The problem, they all explained, is that we are all human beings with human emotions. How does one control that? Can you control who you love or who you hate? I think the world would be a much better place if you could choose those emotions.
So how is it that Forex experts are telling you to control your emotions? This was the main question I had after reading these articles. So, I decided to read some more to find the answer.
The answer is quite simple, there is no way a person can truly control their emotions. Wait, but that is what we, as traders, are being told to do, isn’t it? Well, yes and no. We need to leave our emotions out of the picture, but we can only do that with external help.
The way Forex platforms are engineered, there are many different Forex tools that enable you to trade without emotion. Let me give one example by painting out a certain common scenario.
Imagine you open a trade in which you buy $10,000 USD against the EUR. You invest $100 and trade with a 100:1 leverage. Before I continue, let me just point out that these numbers are actually not a very responsible way to trade since with high leverage comes high risk, but that is a topic for a different time.
Anyway, the USD begins to rise and you begin counting your profits. You are feeling extremely satisfied with yourself and your Forex trading abilities. You are convinced you are going to be one of those success stories in which a person makes millions almost instantly.
However, then something happens that changes the whole picture. The value of your currency reverses its trend and starts its decline. Now, here is the thing, how do you know what to do? Should you pull out and close the position out of fear that your are on a slippery slope or do you stick it out with the hope that it will reverse itself? Either way, you are at the mercy of your emotion. If you close the position, it is out of fear, and if you stay in, it is out of greed. Both are points of weakness, and should not be the way you make decisions in Forex trading.
What you should have done from the second you opened the position is put a “Take Profit” in place. A “Take Profit” is a Forex tool in which you define how much you want to profit in order to make the trade a success. At that value that you hope to reach, the trade is automatically closed. This way, you let your strategy work on auto pilot and thereby trade like a pro.
This was just one example of a way to trade without emotion, and there are many more. However, the important thing is that if you are trading Forex, you want to do it with as much objectivity as possible. Leave your emotions for other areas in your life, it does not belong in the trading room.